AI isn't the star of big tech earnings

Hiya, it’s Alex in Los Angeles. Big Tech earnings are here, and AI is playing second fiddle. But first...Three things you need to know today [View in browser]( [Bloomberg]( Hiya, it’s Alex in Los Angeles. Big Tech earnings are here, and AI is playing second fiddle. But first... Three things you need to know today: • Meta has a rare opportunity to [seize momentum]( with Threads • Intel shares jumped after an [upbeat forecast]( • [False news]( on Facebook reached more US conservatives, study said What investors reward Over the past few months, big tech companies have gone to great lengths to make sure they are talking about artificial intelligence as much as possible, making product announcements, building infrastructure and striking partnerships. All that fanfare took a back seat this earnings season. Investors instead rewarded or punished tech giants based on the health of their long-established main businesses. While Google parent Alphabet Inc., Meta Platforms Inc. and Microsoft Corp. certainly talked about AI, their post-report share moves showed investors are still primarily focused on the businesses that make them the most money — and that clearly won’t be AI for a while. Alphabet and Meta, buoyed by their long-dominant digital advertising businesses, are trading back at levels not seen since early 2022, rising 5.8% and 4.4% respectively, the day after posting results earlier this week. The Google owner’s search ad revenue, which makes up two-thirds of the total, beat analysts’ average expectations, as did ad sales on its video platform, YouTube. Meta, meanwhile, told investors it expects revenue to return to double-digit percentage growth in the current quarter, the gains being driven by its social media platforms. For shareholders, it was a welcome reversal after the company posted its first annual revenue decline last year. Marketers are spending more on its Reels video ads, and improvements to ad targeting and tracking are boosting their performance. “To this point, the results from Big Tech have been consistent and clear around the cloud uptick in spending along with a digital advertising comeback that is on full display from stalwarts Alphabet and Meta,” wrote the team of equity analysts from Wedbush Securities. “‘Veni, vidi, vici’ so far sums up Big Tech earnings. I came, I saw, I conquered.” Microsoft investors weren't as pleased with results from its main revenue engine, cloud computing. The software maker is arguably the furthest ahead on AI, thanks to its early investment in OpenAI, which makes the popular ChatGPT bot. But evidence of customer excitement for its artificial intelligence-infused products couldn’t offset the bad news coming from slowing growth in its Azure cloud business. Sales from Azure did reach a milestone, now representing more than half of the company’s total $110 billion in cloud-related revenue this year, Chief Executive Officer Satya Nadella said Tuesday. But with sales growth slipping, Microsoft’s stock sold off 3.8% the day after results posted. All three of the companies have argued that AI has been a part of their core businesses, helping improve search results and serving us the right Instagram stories, since before AI chatbots were part of the general consciousness. By framing past successes around the technology of the future, the tech giants stand to benefit from the AI hype cycle while arguing they already know how to make money off it. That helps justify the billions of dollars being spent on servers, data centers and engineers that specialize in AI work. Their concentration on AI also helps explain the broader surge in their shares so far in 2023, even ignoring the shorter-term reaction to quarterly earnings: despite the decline this week, Microsoft has gained 38% this year. Google has jumped 47% and Meta has more than doubled. But when it comes to meaningful revenue gains and stock reactions this earnings season, products born into the new age of AI are still more of a financial footnote. —[Alex Barinka](mailto:abarinka2@bloomberg.net) The big story Growing fear of AI contributed to Hollywood’s biggest labor dispute in six decades. Both writers and actors are now on strike, shutting down hundreds of film and TV productions. While AI isn’t the most important issue in these labor negotiations — that would be money — the technology has [turned a business dispute into an existential crisis](, according to Bloomberg Businessweek’s cover story. One to watch [Watch the Bloomberg Technology TV interview]( with Meta CFO Susan Li. Get fully charged DoorDash, the US food-delivery service, is looking to speed up ordering and help customers find food options with an AI-based chatbot. In a scathing letter sent to key federal agencies, Senator Ron Wyden called for multiple investigations of Microsoft over a breach of US officials’ email accounts by China-linked hackers. Montreal-based RailVision Analytics developed AI-enabled software to help locomotive engineers make small adjustments in train driving that could lead to big savings in diesel fuel. Why did Twitter rebrand to X? Where did the X come from? And what’s an “everything app?” Here’s what we know about Elon Musk’s decision to rebrand the influential social media platform. 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